SEN. TED CRUZ (R), TEXAS: No party can remain in power by lying to the American people.

TAPPER: One of only three Republican senators to vote no, Senator Susan Collins, joins me in minutes.

And Democrats battle back.

SEN. CHUCK SCHUMER (D-NY), MINORITY LEADER: I hope we can work together to make the system better.

TAPPER: Can Democrats use this victory...

SCHUMER: We are back.

TAPPER: ... to strengthen their party's agenda? Senator Bernie Sanders is here live on what comes next.

(END VIDEOTAPE)

TAPPER: Hello. I'm Jake Tapper, where the state of our union is tense.

After a Friday staffing shakeup, Secretary and retired Marine General John Kelly is now fewer than 24 hours away from officially starting his new job as White House chief of staff.

And one of his first orders of business could be dealing with an international crisis.

Just hours ago, the U.S. military announced the successful test of its THAAD missile defense system not long after flying U.S. bombers over the Korean Peninsula. This is in direct response to a Friday ballistic missile launch by North Korea.

Meanwhile, President Trump is taking aim at China, saying he's very disappointed in that country -- quote -- "They do nothing for us with North Korea, just talk. We will no longer allow this to continue. China could easily solve this problem."

All of this is sure to make for an interesting first day on the job for John Kelly, who is also dealing with a White House in something of a chaotic situation, plus the health care bill the president insists is still alive.

Joining me now to talk about this is the director of the Office of Management and Budget, former Congressman Mick Mulvaney.

Director Mulvaney, always good to have you on. Thanks for joining us.

MICK MULVANEY, WHITE HOUSE BUDGET DIRECTOR: Jake, thanks very much for having me, as always.

TAPPER: I know you want to talk about policy, but I do just want to ask about some of the White House personnel issues.

When General Kelly is sworn in on Monday as White House chief of staff, will all staff members immediately begin reporting to him?

MULVANEY: I don't know.

I answer to the chief of staff. And I will continue to do that. The Office of Management and Budget actually reports directly to the chief of staff. Obviously, we answer to the president, as everybody does in the West Wing. But, as far as I know, my reporting doesn't change, nor do I have any reason for it to change.

So, we will continue to do our business at OMB the same way we did last week. I think we're doing some good work, and look forward to continuing that under General Kelly's leadership.

TAPPER: I guess one of the reasons I'm asking is just because some of the people who have worked at the White House or work continuously at the White House say that, because there are so many different power centers and people who seemingly have equal status to the chief of staff, it can be confusing, and that's one of the reasons for the chaos. So, for instance, do you happen to know if Anthony Scaramucci, the new

communications director, who said when he came on board that he reports directly to the president, will he have to report to John Kelly? Do you have any idea?

MULVANEY: I have seen those same reports, and I recognize that sort of narrative is out there.

All I know is, it's very clear what we do at OMB. And that's not going to change. So, I really can't speak to the other reporting within the White House.

TAPPER: Let me return to health care.

Following this week's collapse of Republican efforts to repeal Obamacare and on occasion replace it, the Senate majority leader, Mitch McConnell, said he's ready to move on to other issues.

President Trump seems pretty stuck on the issue. He's been tweeting about it all weekend long, including this morning.

This is what he tweeted yesterday -- quote -- "Unless the Republican senators are total quitters, repeal and replace is not dead. Demand another vote before voting on any other bill."

Is this official White House policy, that nothing should be voted on in Congress, not even the debt ceiling, before the Senate votes again on health care?

MULVANEY: Well, I think -- yes. And I think what you're seeing there is the president simply reflecting the mood of the people. Go and poll the American public and find out what the most important issue is to them right now, and it's health care.

So, in the White House's view, they can't move on in the Senate. In the people's view, they should move on in the Senate. They should stay and work and figure out a way to solve this problem.

Keep in mind, you're talking about something they promised to do for seven years. You can't promise folks you're going to do something for seven years, and then not do it. So, in addition to this policy consideration, you do have Obamacare. It is failing. It is hurting people.

So, to not change it allows that to go forward. That's a policy consideration. At the same time, you have the political consideration that you promised folks you would do this for seven years. You cannot go back on that. So, yes, they need to stay, they need to work, they need to pass something.

And I think that's not only official White House position on this right now. It's sort of the national attitude towards it.

TAPPER: Well, the polls indicate that the American people, a plurality of them, support Obamacare. But I don't want to get into a whole discussion of what the American people want. I do want to ask you about a tweet that President Trump sent out

Saturday that was kind of cryptic. He wrote: "If a new health care bill is not approved quickly, bailouts for insurance companies and bailouts for members of Congress will end very soon."

[09:05:05]

Is -- on the bailouts for insurance companies, I will get to that in a second. But is the president threatening to cut off funding for the health insurance plans for members of Congress? Is that what that means, bailouts for members of Congress?

MULVANEY: Yes, actually, I talked to the president at length about that exact issue yesterday.

And I think his attitude is this. And his attitude is pretty simple. Keep in mind he does have this way of channeling a large number of the American public. And what he's saying is, look, if Obamacare is hurting people -- and it is -- then why shouldn't it hurt insurance companies and, more importantly perhaps for this discussion, members of Congress?

There is a certain benefit that members of Congress get as part of an OPM decision from a couple of years ago. And I think the president is simply looking at this and going, is this fair? Is it fair that Obamacare is hurting people? If you live in a county that is what we call now a bare county with no coverage, if you're obliged by law to buy something that is not for sale, that's hurting you.

Or if you have got a coverage, but can't afford to go to the doctor, and that's hurting you, shouldn't insurance companies and members of Congress bear some of that burden as well? So, I'm familiar with that issue. We will see what happens as we move forward.

TAPPER: So, that's on the chopping block, perhaps taking away the health care plans, the health insurance plans for members of Congress.

Would he target staff members for this as well?

MULVANEY: And come on, Jake. Back up just a second. You don't take away coverage from members of Congress and so forth.

Members of Congress are obliged by law to participate in the exchanges. I did when I was a member of the Congress. But there was also a decision from the Office of Personnel Management a couple years ago that allowed a special exemption to the rules on employer contributions to those plans.

So, it's not a concept of taking coverage away. It's the approach of actually obliging members of Congress to follow the exact law that the folks that they govern are following.

TAPPER: So, forcing them on to the Obamacare exchanges, is that what it is?

MULVANEY: The law -- they are already on the exchanges. Let's make that clear. All that stuff you read on the Internet that Congress exempted themselves from Obamacare is not right.

When I was a member of the Congress, I had to be on the exchanges. The special exemption dealt with the employer contribution, how much your employer -- when you're a member of Congress, that's the federal government -- can contribute to your coverage. And that's the rule that the president was talking about in his tweet yesterday.

TAPPER: Lastly, sir, are you optimistic that General Kelly, Secretary Kelly, will bring a discipline to the White House that is needed?

MULVANEY: Absolutely.

And I think that's why he's there. I take Reince at his word. I don't think Reince is hiding the ball on this at all. The president wanted to change directions, wanted to go a different way in the way that office was managed.

I think Reince was terribly effective, but was probably a little bit more laid-back and independent in the way he ran the office. And I think the president wants to go a different direction, wants a little bit more discipline, a little more structure in there.

You know that he enjoys working with generals. We have several of them in the administration who are doing extraordinary jobs. And the president likes that. So, I simply think you saw him say, you know what? Let's try a different direction when it comes to chief of staff. I'm actually looking forward to working with John Kelly.

He has been a tremendous secretary of the Department of Homeland Security. I have enjoyed working with him for the last six months. And I'm actually excited about the next several months.

TAPPER: Director Mulvaney, it's always good to have you. Thanks for joining us this morning. Appreciate it.

MULVANEY: Thanks, Jake.

TAPPER: A week of infighting and drama ends in the resignation of the president's chief of staff, Reince Priebus. Will a general get things in order?

Stay with us.

(COMMERCIAL BREAK)

[09:12:39]

TAPPER: Welcome back to STATE OF THE UNION. I'm Jake Tapper.

A dramatic moment on Capitol Hill, Senator John McCain, in the wee hours of the morning, voting no on the Republicans' latest plan to repeal and replace Obamacare.

His vote, along with that of two other Republicans, Murkowski and Collins, was enough to quash the bill.

And President Trump, frankly, looked back in anger.

(BEGIN VIDEO CLIP)

TRUMP: They should have approved health care last night, but you can't have everything. Boy, oh, boy. They have been working on that one for seven years. Can you believe that? The swamp.

(END VIDEO CLIP)

TAPPER: Joining me now, one of the three Republican senators who voted no on that legislation, Senator Susan Collins of Maine.

Senator, thanks so much for joining us.

SEN. SUSAN COLLINS (R), MAINE: My pleasure, Jake.

TAPPER: So, Senator, before I get to policy, I just have to ask, I saw this viral video of you getting off an airplane in Bangor, Maine, and a crowd of people spontaneously and organically applauding you.

I don't know if that happens to you every time you get off an airplane in Bangor, Maine.

(LAUGHTER)

TAPPER: But it was a pretty remarkable thing.

What is the response you're getting?

COLLINS: It really was so extraordinary, heartwarming and affirming.

I got off the plane, and there was a large group of outbound passengers, none of whom I happened to know, and, spontaneously, some of them started applauding, and then virtually all of them started to applaud. It was just amazing.

I have never had that happen in the 20 years that I have been privileged to serve in the Senate. So, it was very encouraging and affirming, especially arriving back home after a very difficult time.

TAPPER: A very difficult time, very contentious time.

President Trump, as you know, is hoping to revive the effort to repeal and replace Obamacare. He needs the vote of one more senator in order to flip someone's vote, whether yours or Murkowski's or McCain's.

The president appears to be threatening to cut off funding for the health care plans that the members of Congress receive. Would that kind of pressure change your vote?

COLLINS: No.

But, you know, the ball is really in our court right now. There are serious problems with the ACA. We're seeing collapsing markets in some areas of the country where, even though people have subsidies, they're not going to be able to buy an insurance policy. [09:15:08]

So, our job is not done. And what we need to do is to remember my friend Lamar Alexander's words, which is that he says that Congress doesn't do comprehensive well.

We need to go back to committee, to the Health Committee, and the Finance Committee, identify the problems, carefully evaluate possible solutions through hearings, and then produce a series of bills to correct these problems, the most serious of which is the pending collapse of the insurance markets.

And I certainly hope the administration does not do anything in the meantime to hasten that collapse.

TAPPER: Well, as you note, the president is also threatening to cut off what he calls bailouts for insurance companies. Presumably, he's referring to the payments the government makes to insurance companies to reduce the costs for low-income Americans.

The Trump administration has threatened to withhold this money before, which has led to uncertainty among insurance providers. If President Trump were to officially withdrawal that funding, would that affect your vote on health care?

COLLINS: It would not affect my vote on health care, but it's an example of why we need to act to make sure that those payments, which are not an insurance company bailout, but rather help people who are very low-income afford their out-of-pocket costs towards their deductibles and their co-pays.

And that's what we need to remember. So, it really would be detrimental to some of the most vulnerable citizens if those payments were cut off. They're paid to the insurance companies, but the people that they benefit are people who make between 100 percent and 250 percent of the poverty rate.

So, we're talking about low-income Americans who would be devastated if those payments were cut off, though the threat to cut off those payments has contributed to the instability in the insurance market.

But what Congress needs to do is to start by the first bill that we should consider is how to stabilize the market. And that is a key component, to ensure that those payments continue to be made to benefit low-income Americans.

TAPPER: You are one of three Republican senators who voted against the so-called skinny repeal of Obamacare.

When did you realize that Senator John McCain was going to join you and Senator Lisa Murkowski of Alaska in voting no? And what Vice President Pence say to you when he walked up to you on the Senate floor and tapped you on the back?

COLLINS: Well, Senator McCain had given an extremely eloquent speech on the Senate floor the day before, when he had arrived back from Arizona after his devastating diagnosis with brain cancer.

And he called for a return to the regular order, where we would work together across the aisle to produce legislation. It has been my experience as well that that is what works best and that is what produces sound legislation.

So, he had given this dramatic and heartfelt speech. But it was only date of the vote, just a few hours before the vote, that I realized from my conversations with him that he was going to vote no.

Vice President Pence had come over originally to break the tie that most people anticipated was going to happen when Lisa Murkowski of Alaska and I voted no. Instead, the vice president ended up coming over to lobby John McCain directly, to try to get him to vote yes.

And I was talking with John. And I felt this tap on my shoulder, and I turned around, and it's the vice president. And he said to me, "Boy, are you tough." But he softened that by putting his arm around me.

And he has always been extremely courteous in his conversations with me. He then started talking with John. We were reminiscing in some ways. And then it was obvious he wanted to have a private conversation with John about the bill. So, I stepped aside and did not participate in that part of the bill.

But I was very proud of John. Once again, he showed the courage that he has demonstrated throughout his life to do the right thing, even when it's not popular, even when it's hard.

TAPPER: The health care bill is just one of many moments of drama in the last week.

[09:20:01]

There's been a tremendous amount of infighting at the White House, the president attacking his own attorney general, the communications director attacking the now former chief of staff and the president's senior strategist.

Is this affecting the president's ability to get his agenda passed on Capitol Hill?

COLLINS: It doesn't really affect the president's agenda.

As I said, I really think that the health care bill -- and I think it will be a series of bills -- is in our court now. But I don't think it's helpful to the presidency in general.

And I -- the president certainly has the right to choose whomever he wants to be on his personal staff. But I certainly hope that his new communications director strikes a different tone than he has in his first week on the job.

TAPPER: I want to ask you a question about governing in the Trump era. When the president tweets, do you consider those tweets to be policy, or should they be ignored, in the way the Pentagon seems to be, in a way, treating his tweet about banning transgender people from serving in the military? They're kind of -- they seem to be saying, oh, well, he tweeted that, but we don't have any policy, so we're just going to keep on as we're going.

How do you take the president's tweets?

COLLINS: I personally don't think that governing or setting policy by tweet is a wise approach. It creates confusion. It does not give details. These are serious issues that we're dealing with.

I do understand why it's attractive to the president to be able to get his message out. But when it comes to an issue that has widespread implications, whether it's health care or the transgender issue for our military, I just don't think a tweet is the right way to go.

I think he should have a serious policy discussion with his Cabinet, with those who are responsible for implementing policy, because then there's much more clarity in how to proceed. So, that would be my advice to the president. But I know he's very fond of Twitter.

TAPPER: All right, Senator -- he sure is.

Senator Susan Collins of Maine, thank you so much for your time today. We appreciate it.

COLLINS: Thank you.

TAPPER: He celebrated the collapse of the Republican health care bill as a victory for the American people, but is Senator Bernie Sanders ready to work with Republicans on a compromise going forward?

Bernie Sanders joins us live next.

(COMMERCIAL BREAK)

[09:27:07]

TAPPER: Welcome back to STATE OF THE UNION. I'm Jake Tapper.

President Trump is now threatening to withhold payments to insurance companies that help low-income consumers in retaliation for Republicans failing to move forward on repealing and replacing Obamacare.

Joining me now is independent Senator Bernie Sanders of the great state of Vermont.

Senator Sanders, always good to see you. Thanks for joining us.

Let's just plunge right into health care, President Trump threatening on Twitter both lawmakers and insurance companies on Saturday, saying he's prepared to cut out the -- cut off the -- quote -- "bailouts" that you and the insurance companies receive. What do you make of these threats?

SEN. BERNIE SANDERS (I), VERMONT: You know, I really think it's incomprehensible that we have a president of the United States who wants to sabotage health care in America, make life more difficult for millions of people who are struggling now to get the health insurance they need and to pay for that health insurance.

Maybe the president should put down his -- stop his Twittering -- tweeting for a while, and understand that America today is the only country, only major country on Earth not to guarantee health care for all people. And the solution is not to throw tens of millions of people off of health insurance that they currently have.

TAPPER: What do you make of the threats directly at members of Congress about your health insurance? Mick Mulvaney was on the show earlier trying to explain what the threat exactly meant.

SANDERS: Well, I would turn that around a little bit and say to the president of the United States that, yes, every single American in every state in this country should be able to get the health care that members of Congress have.

And that is why, if we are able to return to regular order, if we are able to have a serious debate on the health care crisis, I think there should be a public option available in every state in this country.

If people don't like the private insurance that they're getting, if it's too expensive, they should have a Medicare-type public option available in every state in this country. And that's one of the ways forward.

TAPPER: When you were -- when you were on the program on July 2, you told me you were going to introduce a singer-payer health care plan literally as soon as we're through with the Republican health care debate.

It seems like we're though, and the Obamacare repeal effort has collapsed. Are you going to introduce single-payer?

SANDERS: Absolutely. Of course we are.

We're just -- we're tweaking the final points of the bill. And we're figuring out how we can mount a national campaign to bring people together.

Here is where we are, Jake. And it's important for Americans to understand this. We are the only major country on Earth, the only one, not to guarantee health care for all people. The result is 28 million people who are uninsured, millions of people who are paying deductibles and co-payments that are far too high.

And if the Republicans had gotten their way, there would have been another 30 or 32 million people thrown off of health insurance. That is crazy. What we should do is move in the direction of every other major

country, guarantee health care to all people as a right, not a privilege.

[09:30:00]

Second thing you got to do is ask ourselves a very simple question, which my Republican friends and the president does not, why is it that in America, per capita, we are spending far, far more on health care than do the people of any other country? Why are we paying, by far, the highest prices in the world for prescription drugs compared to people all over the world?

Those are the issues we've got to tackle. And I think the answer is pretty obvious. What we have now is a health care system not designed to guarantee health care to all of our people in a cost-effective way.

What we have is a dysfunctional, complicated health care system designed to make as much profit as possible for insurance companies and drug companies. And you have incredible -- go ahead.

TAPPER: I want to get -- I want to get into single -- I want to get into single payer -- just a quick note, the 32 million figure that the senator is referring to is from a congressional budget office study is what happens if there is full repeal Obamacare with no replacement. Some of those of course are people voluntarily getting off health care because there's no more punishment.

But let's talk about single payer because it was attempted in your home state of Vermont and it didn't work because they couldn't get the funding because it would be too expensive, the Democratic governor said. And then recently it was -- it failed in California as well.

Democrats again not able to come up with a way to pay for it. These are cobalt blue states, Vermont and California, where people wanted single payer and there were problems because it would cost too much. How do you make it national if you can't even get it in Vermont or California?

SANDERS: A single payer health care system, in my view and according to studies that I have seen, would save the average family significant sums of money.

And what Republicans sometimes do is confuse the issue and they say, well, you're going to pay more in taxes. What they forget to tell you is that, if you are a family of four now paying $15,000 or $20,000 a year in private health insurance, you're not going to be paying that at all.

Once again, if you look at Canada single payer health care system per capita, their costs are far, far less than the United States. If you look at the U.K., if you look at countries around the world, all of one -- all of which have different approaches to a national health care system in every instance, they are spending substantially less per capita than we spend in the United States, substantially less for prescription drugs.

The problem with our system is it is so complicated for the consumer, for the doctors is that a hospital, for example, might be dealing with 15, 20, 30 different insurance policies. It takes an enormous amount of time, energy and expense to figure out that you have a $5,000 deductible, you have a $10,000 deductible. The goal simply is to say that every person in this country through a single payer system is entitled to a comprehensive health care approach and that will save substantial sums of money in administrative costs, substantial sums of money in lower prescription costs, substantial sums of money in doing away with the profiteering of the drug companies.

By the way, the five top drug companies in 2015 made $50 billion in profit. The CEOs in the health care industry make enormous salaries.

TAPPER: Right.

SANDERS: We should join the rest of the world, begin that discussion immediately. And I will be introducing legislation to do just that.

TAPPER: Why couldn't this happen in Vermont then? I mean, what's the issue in Vermont? Vermont would seem to be a perfect test case.

SANDERS: Well, this is -- politically, this is difficult. And by the way, in California, the debate is not over.

It passed, I think, the Senate. It's now gone to the House. And that debate will continue.

Look, taking on the insurance companies and the drug companies, taking on Wall Street, taking on a lot of very powerful forces that make billions of dollars a year from the current health care system is not going to be easy. And it's not going to take place until millions of people get involved in this struggle and appreciate the fact that whether you're rich or whether you are poor, health care is a right.

The idea that the Republicans wanted to throw 32 million people off of health insurance, cut Medicaid by $800 billion, raise premiums for older workers, defund Planned Parenthood, make it almost impossible for people to have a pre-existing -- who have pre-existing conditions get the health care they need. That is abominable. That is moving in exactly the wrong direction.

So we need a serious discussion about a serious issue. And I believe at the end of the day, the American people will conclude that Medicare -- Medicare is working now for people 65 --

TAPPER: Right.

SANDERS: -- or older. Let's expand it to everyone.

TAPPER: You were asked recently about the possibility of running for president again in 20. You said -- quote -- "I am not taking it off the table."

[09:35:01]

On August 31st you're going to be back in Iowa, specifically Iowa City, to promote your book "Bernie Sanders Guide to Political Revolution." Are you testing the waters for 2020? Is this still possible that you're going to run for president again?

SANDERS: I know hard to believe, Jake.

You know, Jake, one of the things that I always get a kick out of is that in Canada they have elections, I think it is two month period. In the U.K. it's even shorter than that.

In the United States we have never ending elections. Right now is the United States' senator from the state of Vermont I'm dealing with enormous issues. It's not just health care, trying to create an economy that works for all Americans and not just the one percent.

It's developing a tax system that does not give huge tax breaks to the wealthiest people in this country. Rebuilding our crumbling infrastructure. It's dealing with climate change, transforming our energy system.

Those are the issues that I and other members of Congress should be dealing with right now. We've got three years before the presidential election. We've got plenty of time for candidates or potential candidates to make decisions.

TAPPER: I'm going to take that as a yes, it's still on the table. Senator Bernie Sanders, appreciate it. Thank you so much for your time.

SANDERS: Thank you very much.

TAPPER: Another week, another top White House staffer loses his job. Are we sure this isn't "The Apprentice"? How a flashy and occasionally foul mouthed West Wing newcomer won the latest power struggle. "The Mooch" is loose, next.

(COMMERCIAL BREAK)

[09:40:49]

(BEGIN VIDEO CLIP)

SCARAMUCCI: When I said we were brothers from the podium, that's because we're rough on each other. Some brothers are like Cain and Abel.

(END VIDEO CLIP)

TAPPER: I guess we now know which one is Cain and which one is Abel.

Our panel is here. Michael Caputo, let me start with you. So, I guess Scaramucci won this fight between him and Reince Priebus. MICHAEL CAPUTO, FORMER SENIOR ADVISER, DONALD J. TRUMP FOR PRESIDENT: I'm not sure that's all this is. It's probably some of it.

I mean, I'm from New York. I'm involved in New York politics. It's a rough and tumble place.

You fight with each other and then you make up. And it happens all the time.

The New York culture is a little unusual for the White House, I guess. But, you know, strap in.

We've got three more years of this. You're going to see more New York culture.

TAPPER: It does seem like in some ways, that this is -- if you look at the White House with different power centers, there's the family power center --

MIKE MURPHY, FORMER ADVISER, JEB BUSH SUPER PAC: Right

TAPPER: -- there's the New York power center, there's the nationalist power center and then there's the establishment power center.

MURPHY: Right.

TAPPER: It looks like the establishment, the RNC folks, are really on their way out.

MURPHY: It seems to be that way. You know, it's tough to do the criminology on this. And the very fact that that's what we're doing now --

TAPPER: I don't know -- I don't know if they would appreciate that term.

(LAUGHTER)

MURPHY: Pun totally intended. But that's the smaller issue.

The bigger issue is, will it change? Will we get out of the business of trying to decide which faction is killing another faction in something that is supposed to operate very efficiently? Now we have a new chief of staff and that's going to be the question.

Will anything change? And particularly will the commitments that I think General Kelly probably got from the president that you will really be in charge, mean anything? Will it stand up?

TAPPER: And, Congressman, we heard Mick Mulvaney saying today earlier in the show that he hopes that this is retired marine general is going to be able to bring some discipline to the White House that Reince Priebus, for all his strengths, maybe was a little bit more laid back and independent.

REP. TED LIEU (D), CALIFORNIA: Jake, it won't matter. Whether it's General Kelly or Reince Priebus, Scaramucci, or Spicer the reason the White House is failing is not because of staff it's because of the president himself.

This is like rearranging deck chairs on a Titanic. You've got a president who lies, who makes shocking comments on Twitter, who has not interest in the substance (ph) legislation. Things are not going to change.

TAPPER: Congresswoman, you said something about General Kelly that was a bit controversial. And I want to give an opportunity for everybody to discuss it and for you to defend it.

You said, "By putting General John Kelly in charge, President Trump is militarizing the White House and putting our executive branch in the hands of an extremist."

REP. BARBARA LEE (D), CALIFORNIA: Let me first say, I have come from a military family. My dad served in World War II and Korea. And so I respect and honor the military and recognize the sacrifices that all of our military men and women make as well as General Kelly and his history and his sacrifices.

What I'm talking about is his tenure as homeland security secretary and the very extreme policies of promoting family dislocation, deportation of innocent men and women and children, breaking up families, promoting a Muslim ban, promoting a wall between the United States and Mexico. Those are extreme policies.

And so this is very troublesome to me, to have this kind of power now centralized in the White House because these are very serious matters and these are extreme policies. But believe you and me as it relates to his service in the military, again coming from a military family, I recognize and honor the service men and women of our country.

CAPUTO: Well, you know, original Trump backers gave Reince Priebus a chance because he really earned it on the campaign trail. He was a real asset to the president.

We've had six months of this and we're all very hopeful now, those of us who backed Trump from the beginning, that General Kelly can do a better job of marshalling (ph) the White House, the cabinet members, and the president himself in selling, selling, selling, like he did on the campaign trail.

And General Kelly, you know, I'm a vet and I can tell you that I believe that the Trump culture is going to respond very well to this. I worked at the convention. In the president's office, at the convention, we are run by Ryan Price and David Urban, both combat vets.

There were zero leaks. There was no infighting and there was a strict chain of command. I think the Trump culture is going to respond well to this. And I'm looking forward to seeing the changes that the general is going to bring.

MURPHY: I think the problem is the Trump culture. [09:45:00]

See, the president didn't fire the chief of staff because Donald Trump is the chief of staff. Reince hasn't had any power in there since about day 31.

So the question is, can Kelly change Trump? Does Trump even want to be changed?

If so, yes, we could have a more effective White House but the keystone cop culture that was created by one guy, he fuels it, he's got all these people with walk-in privileges. Everybody's favorite calling card is, I report directly to the president.

That's poison in this kind of organization. So with respect to congresswoman about militarization, we could use a little chain of command to try to make this place functional.

LIEU: But there's another culture problem. I served in active duty in the military and there are certain values drilled into us, such as integrity, loyalty, accountability. I think it's really hard for General Kelly in long term to work for a boss who shows such great disdain for these values.

LEE: I have worked in Washington, D.C., as an intern, a staffer now as a member of Congress. I've been there through five administrations. I have never seen such chaos and confusion.

And I have to tell you, I'm quite concerned about the foul language and profanity that coming from the White House that our children are hearing. What do they think? What do they believe?

And for me it's very troubling. It's -- you know, the president, cyber bullying, for example, his attorney general, that's wrong. And it just seems like what Congressman Lieu said is correct, it has to start at the top. Hopefully the president will see that he needs some stability for the good of the country.

CAPUTO: Vanity in Washington, color me shocked. I'm just amazed.

TAPPER: Well, I want to read something to you from "The Wall Street Journal" which is obviously conservative but it's fair to also say that they haven't been the biggest supporters of President Trump. I don't think they think he's a conservative, for one.

But they say in an op-ed called or an editorial -- a House editorial called "Priebus Wasn't the Problem," "This shuffling of the staff furniture won't matter unless Mr. Trump accepts that the White House problem isn't Mr. Priebus. It's him."

Do you really think that General Kelly, Secretary Kelly, White House Chief of Staff Kelly, whatever you want to call him, will be able to go into the president's office, Oval Office and say, Mr. President, please stop tweeting? Or if you're going to tweet, let's have a discussion before you do it because it is an official message and it is undermining what we are trying to do. CAPUTO: I've known the president for quite a while now, several years. And I know that he responds very, very well to flag officers. It's a group of people that he's very respectful of.

I think that if he and General Kelly sat down, he certainly had a conversation like Mike said, and I trust that the president is going to stand by whatever commitments he made to the general. This White House could use a marine officer in charge. We all agree about this.

I think we're going to see some good things.

MURPHY: So I think the huge question here, though, is if Kelly got that commitment -- and I agree, the military guys intimidate the president a little bit. You know, the only beach he landed on was at studio 54. He sees the brass and he respects it.

So the question, how will Kelly test the president?

TAPPER: Dating yourself with that reference.

MURPHY: I know. Old references is my specialty. Yes. No, no, no.

TAPPER: That's good.

MURPHY: I -- Buster Keaton, you know --

(LAUGHTER)

MURPHY: -- but the point is, Kelly, he didn't get four star marines by not knowing strategy. He has got to test it right away.

Hey, I'm going to put Jared's security clearance on suspension until he's clear. Some big tough thing, not only to see if Trump meant it, which I think is an uphill battle (ph) about him having that power, but two, to show Washington incorporated there's actually somebody in charge that they can do business with. He has to prove it.

And that's actions and he has got a quick window to test it right now when the president might actually let him be in charge or this is all just cosmetic and it doesn't mean anything.

TAPPER: Congressman, you're not a supporter of the president.

LIEU: Yes.

TAPPER: But if you were, just as an American who wants the president -- presumably you want the drama to stop. You want the actual business of governing to be more efficient.

What advice would you give the president?

LIEU: You know, I remember watching the president's joint address to Congress. And afterwards, I thought, you know, doesn't make Democrats' jobs harder. I thought he gave a good address.

But as an American, I feel better. I want him to go back to that. I want him to make America proud.

I don't want him to embarrass us. I think he should stop doing Twitter. And I think he should listen to his advisers and then show some interest in legislation.

He has shown no interest in substance of these bills. It's one reason that they've had no legislative accomplishment in his first six months in office.

She wrote in an op-ed called "Trump is a drama queen." "The president's primary problem as a leader is not that he's impetuous, brash or naive. It's not that he is inexperienced, crude, an outsider. It is that he is weak and sniveling."

That's pretty harsh stuff.

LEE: It's harsh. But let me say, the president really should work with us to help us create good paying jobs, to help us reduce the cost of living for Americans. People are really struggling out there.

He needs to work with us to help us reduce the cost of prescription drugs, to actually develop a plan for skills and workforce training and education so that people can get jobs of the 21st century.

[09:50:04]

You know, people need help in terms of the basic standard of living. And so, he should work to help us do that. Creating infrastructure plan, you know, create economic growth so that people have good paying jobs and not have to struggle and work two jobs and still live below the poverty line.

So that's what he needs to do.

TAPPER: You talked to a lot of those voters in your talk radio in Buffalo. What did they tell you? What do they want the president to do?

CAPUTO: A lot of them are -- we really wanted the repeal and replacement of Obamacare. We were promised this by all of the Republicans in Congress, House and Senate. And the president resonated that promise across the campaign trail.

You know, this is the end of the month. I'm starting to get ready to write my check for the, you know, Obamacare which I got off the exchange for our family of four and I noticed that I still have $8,000 left in my deductible account. Eight thousand dollars and we're at the half way point.

We pay over $1,200 a month. Republican supporters of Donald Trump wanted repeal and replace. And if the Republicans in the House and at the Senate think that they can just leave it in place now and leave it in status quo, they're going to pay at the ballot box. I think a lot of Trump supporters also want tax reform. I don't think we're -- we really wanted to wait very long for it. There's nothing wrong with this presidency or the Republican Congress that three percent to four percent annualized growth couldn't fix.

TAPPER: All right. Thanks one and all for being here. Great panel. Really appreciate it.

As Sean Spicer's time in the White House comes to end his future job is anyone's guess and some are hoping his next move might be on the dance floor. Stay with us.

(COMMERCIAL BREAK)

TAPPER: As White House briefings were appointment viewings so what is Sean Spicer planning for an encore? Is it possible that what we read in the paper is true? Maybe "Dancing With the Stars"? That's this week's "State of the Cartoonion."